ASML, the leading supplier of computer chip-making equipment, is expected to announce a surge in new orders during its second-quarter results presentation on Wednesday. This is due to customers expanding their capacity in response to the high demand for AI chips. One area of focus will be whether Chinese companies have continued their substantial purchases of equipment used to produce older generations of chips, particularly those used in electric vehicles. This has raised concerns among Western policymakers who have restricted the sale of more advanced technology. Industry analysts anticipate ASML may revise its guidance, as key manufacturers of cutting-edge chips, such as Taiwan's TSMC, which produces chips for Nvidia and Apple, could increase and expedite their equipment orders. ASML dominates the market for lithography systems, which are intricate tools that employ lasers to aid in the creation of small circuitry on computer chips. The company is the sole provider of lithography systems that utilize extreme ultraviolet (EUV) wavelengths, a requirement for TSMC's production of complex chips for smartphones and AI applications. Mihuzo analyst Kevin Wang stated, "We expect ASML's order received value to approach 5 billion euros in the second quarter, surpassing consensus estimates, " citing strong orders for ASML's EUV product line from TSMC. These results mark the first under the leadership of ASML's new CEO, Christophe Fouquet, who assumed control at Europe's largest tech firm amidst the ongoing U. S. -China dispute over chips. ASML, with a market valuation of approximately 400 billion euros ($437 billion), has labeled 2024 as a "transition" year, expecting flat business before a robust rebound in 2025 driven by demand for its most advanced tools. The company's shares have surged 45% this year and are trading near record highs of over 1, 000 euros each, representing about 40 times the projected earnings for the upcoming year—a substantially higher valuation compared to the STOXX Europe 600 tech index. A growing order backlog would provide reassurance to investors that demand for ASML's premium products is rebounding following a weak first half of 2024, during which the company predominantly relied on orders for older equipment from China. According to the average estimate from 16 analysts based on LSEG data, the second-quarter net income is predicted to be 1. 41 billion euros on revenue of 6. 04 billion euros. This compares to net income of 1. 94 billion euros on revenue of 6. 90 billion euros in the same period last year. ASML concluded the first quarter with a 38 billion euro order backlog.

To achieve its forecasted sales of 30 billion-40 billion euros by 2025, the company needs new orders ranging between 4 billion and 6 billion euros each quarter. ASML's machines, which can cost up to $300 million each, have delivery lead times of 12-18 months. Orders are closely coordinated with customers such as Samsung, Intel, and memory specialists SK Hynix and Micron. For slightly older chipmaking technology, ASML competes with Canon and Nikon from Japan, while Chinese firms like Shanghai Micro Electronics Equipment (SMEE) are striving to develop their own lithography tools. However, due to U. S. -led export restrictions, Chinese chipmakers are unable to obtain ASML's most advanced tools. As a result, they have significantly increased their purchases of older ASML equipment over the past year, which accounted for nearly half of the company's sales in the first quarter. China's rapid expansion poses a threat to the market share of non-Chinese firms and intensifies the competition. The European Commission has initiated a survey of European chip industry companies to gauge their views on whether Chinese state subsidies are distorting the market. ASML asserts that the world still requires older chips, as evidenced by shortages during the COVID-19 pandemic, and China is stepping in to meet this demand. ($1 = 0. 9164 euros) (Reporting by Toby Sterling; Editing by Jan Harvey)